Coffee prices in August rose at their quickest in nine months, led by a 9.2% surge in robusta values, amid growing ideas of supply tightness fostered by thin Vietnamese inventories and strong Brazilian demand.
Coffee prices, as measured by the International Coffee Organization (ICO) index, grew by 4.9% in August, their fastest rate of expansion of this year.
The increase was led by robusta coffee, which as measured by the ICO appreciated by 9.2% month on month, an unusually strong gain, exceeded only six times in the past decade.
Robusta coffee prices have been buoyed by a rundown in stocks in Vietnam, the top producer and exporter of the variety, which will not be replenished until the harvest starts next month.
Vietnamese merchant Simexco Daklak cautioned even two months ago that “due to a shortage of domestic supplies, traders are having trouble obtaining enough beans to fulfil their export contracts”.
Commerzbank has also noted that “stocks in Vietnam are dwindling rapidly”, a drawdown which, “coupled with gloomy crop prospects” for the forthcoming harvest, has supported robusta values.
Arabica vs robusta
Meanwhile, demand is being spurred by the affordability of robusta coffee compared with arabica beans.
The robusta discount to the most expensive arabica beans tracked by the ICO, Colombian milds, reached 197.76 cents a pound – the highest on available data going back to 2010, and more than twice the five-year average spread of 94.51 cents a pound, on GrainPriceNews calculations.
Appetite for robusta beans has been particularly buoyant in Brazil, where research institute Cepea noted separately that demand had “increased because arabica prices have been high, leading agents from the industry to raise the share of robusta in blends.
“This scenario, added to the winter-time in Brazil and the consequent increase in the consumption of warm beverages, such as coffee, resulted in a higher number of deals for robusta in the Brazilian spot [market].”
The robusta supply squeeze has been viewed as spurring a drawdown in stocks held for delivery against London robusta futures, with the ICO noting a fall of 10.9% in these inventories last month, to 1.61m bags.
The ICO also highlighted an acceleration in world exports of soluble coffee, which is mainly made from robusta, with shipments reaching 1.01m bags in July, growth of 18.5% year on year.
By contrast, global exports of green coffee beans, at 9.04m bags in July, fell by 8.8% year on year.
The growth in robusta prices last month far outpaced in percentage terms the expansion in Colombian mild arabica beans, of 3.4%.
The relatively tepid growth in prices of Colombian milds, co-incided with some signs of recovery in the South American country’s production, which has been depressed by excessively wet weather.
La Nina periods have a history of bringing wet weather to the South American country.
Colombia’s coffee production last month, at 949,000 bags, rose by 3.7% from August 2021, according to data from the Federación de Cafetera de Colombia. That represented only the third month in the last 16 to show year-on-year expansion.
Colombian output over the first eight months of this year, at 7.32m bags, remains down 520,000 bags year on year, and at its lowest for the period since 2013.